Palm is to cough up $22.5m to Xerox to settle a long-running patent spat over who really owns the Graffiti character entry system Palm used to bundle with its PDAs.

Xerox sued Palm in April 1997, alleging Graffiti incorporated technology and techniques outlined in one of its many US patents, 5,596,656. In December 2001, Xerox prevailed in a US District Court fight, but Palm appealed against ruling. Meantime, it licensed CIC's Jot technology, a system already used by Microsoft for its PocketPC operating system.

Palm rebranded Jot as Graffiti 2, though ironically it was less like the original Graffiti than the PocketPC implementation of Jot was. Go figure...

In May 2004, after Palm had split into PalmOne and PalmSource, an appeal court judge ruled Xerox's patent to be invalid because of prior art. Xerox didn't take the verdict lying down and issued a counter-challenge shortly afterward.

The upshot, two years on, is Palm - its original name now restored - paying Xerox $22.5m to end the legal battle and to license three Xerox patents, including 5,596,656. The two firms agreed not to pursue each other through the courts for seven years.

PalmSource, now owned by Japanese browser software company Access, and 3Com, Palm's former parent, are both likewise freed from the shadow of Xerox's wrath.

We'd like to think all this means the original Graffiti will return, but Palm's increasing focus on keyboard-based devices suggests not. Why bother then? Perhaps rumoured suitor Research in Motion doesn't want this particular lawsuit in motion while it puts in a bid for the PDA pioneer...

Whatever, Palm will record the $22.5m as a hit in its Q4 FY2006 results. ®